May 19, 2012

EURUSD target reached! Next direction unclear



After neckline breakthrough the “head and shoulders” figure has been completed. In March 26th post "Possible EURUSD head and shoulders formation" target set was 1.2690 which after several updates has been lowered to 1.2620. Although not exactly reached as recent the EURUSD bottom touched 1.2635 (vs. 1.2620 expected), the accuracy of this analysis tool was high – 15 pips. 

EURUSD target reached
EURUSD target reached

What to expect next? The level 1.2620 is strong support and consolidation around this level is possible. However if the situation in Europe quickly deteriorates breakthrough under 1.2620 could dive the euro to June 2010 low at 1.2150. Possible Greek exit could let the euro to suffer even bigger losses. If Europe manage to avoid worst case scenario than quick rally to 1.30 is expected.

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May 11, 2012

Silver Correction Ended?



Silver’s been one of the most punished commodities this year so far. Currently it is trading with 1-2% gain year to date and 22% lower than its March peak. However closer analysis of the technical indicators suggest that the trend is at the reverse point.

Silver has been traded in triangle consolidation since the beginning of 2011. After reaching historical high at $48 it sharply fell to $25.60 at year (2011) end. Since Oct 2011 silver has entered parallel channel determined by Nov 2011 and March 2012 peaks and Dec 2011 bottom. Now the precious metal is trading slightly above the support line of the mentioned channel. As seen on the chart this line proved to be strong support. In addition there is some similarity between current bottom and previous one which supports the trend reversal. Both bottoms breached the support line and both of them breached the 30’s (the oversold area) of RSI (relative strength index). Successful breakthrough above triangle resistance line at $32 could open the way to $39, some 40% from current levels.

Silver showing reversal signs
Silver showing reversal signs

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May 10, 2012

Silver Wheaton Set To Rebound



With mounting concerns over global and especially Chinese growth precious metals price have corrected drastically. Since its 2011 peak at 174 GLD (gold trust) is now trading 11.5% lower, silver trust (SLV) lost 23%. Investor’s nervousness is pushing back metals prices, however this growing pessimism is actually growing opportunity.

Silver Wheaton Set To Rebound
Silver Wheaton Recent Turnpoints

One of the truly hard beaten victims of the commodity correction is SLW. The company has market cap of $9.5 billion, low debt level and is full of cash. The profit margins are 70%+. However those facts did not protect the shares from 36% plunge since its 2012 peak. Now SLW is trading close to 52 week low and seems to offer reasonable risk reward ratio.

Closer look at the chart shows some support for the above assumption. SLW just closed above two year support trend line determined by Dec 2011, Oct 2011 and Jan 2011 lows. Usually share price closing around this trend line has been followed by rally. Moreover in the case of Dec and June lows divergence (between the price trend and the Moving Average Convergence Divergence - MACD indicator) suggested the upcoming reversal.  Another point to consider is the price relative to its 200 day simple moving average. In the last three cases the price bottomed more than 20% before turned back. In addition both oscilator indicators Stochastic index and Relative Strength Index suggest the stock is oversold with reading under the 30 (reading above 70 indicates overbought level).
The combination of those signs let us assume that SLW correction is close to the end. Considering the worsened global growth outlook it is possible that price to consolidates for a while before starting the new rise.

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May 4, 2012

NASDAQ target reached! Now what?



In post published 15th of Feb for the technological index NASDAQ100 we set target of 2787 when the index traded at 2575. The market seemed to be overbought at that time but the analysis used proved to be quite accurate - on  26th of March the target was reached.

The target setting is based on a simple technical analysis which uses the triangle consolidation length (within the rectangles) as target pointer. When the breakthrough of the triangle is spotted then the the target base is set at that point. Adding triangle length to the base gives the next target level.

As seen on the chart the targeted level has been exactly reached. Since then the index has dived into a correction. Further analysis of the last two years index chart shows interesting seasonal pattern. NASDAQ100 enters bullish phase which usually starts at year end. The bullishness continues roughly until the spring months April-May. The following summer period tend to be corrective with zigzag consolidation moves. This pattern has been followed in both 2010 and 2011.

Nasdaq in repeating seasonal pattern
Nasdaq in repeating seasonal pattern

If the mentioned pattern is repeated again this year we have just entered the same corrective consolidation.  Considering the fact that the technological companies are relatively overvalued (to name AAPL with the highest weight in the index) this might be the case. The indicative bottom should be 2400 - the 200 moving average, which tend to be strong support. 

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